Audit: Pollution Control Agency failed to validate contractor payments

The Pollution Control Agency came under fire after an audit revealed the agency’s failure to adhere to compliance measures when doing business with outside contractors, causing the agency to overpay in some instances.

The Office of the Legislative Auditor was tasked with determining whether the Department of Administration’s Office of State Procurement provided adequate oversight of professional/technical contract expenditures for five state departments over the past three years, including the MPCA.

The audit concluded that the Administration Department provided “generally adequate oversight” over these types of contracts. However, it found instances of noncompliance and internal control weaknesses within all five departments.

Findings were shared with the House Environment and Natural Resources Policy and Finance Committee Tuesday, detailing how the agency did not properly approve and validate certain contractor payments.

Findings

Several instances of invoices not being properly reviewed or approved were discovered during the contract review. In one occurrence, four of 10 invoices tested had hourly rates that exceeded amounts permitted under the contract, resulting in an overpayment to contractors of $1,544.

The MPCA also failed to obtain adequate documentation to substantiate some contract payments. In 17 of the 34 invoices sampled, the agency paid contractors $65,411 without obtaining sufficient evidence to validate the charges, which included items such as travel expenses and payments to subcontractors.

The audit found the MPCA did not always follow provisions prohibiting agencies from paying more than 90 percent of the contract amount until contractors fulfilled obligations. In the seven MPCA contracts tested, two retainage errors occurred, which the legislative auditor’s office categorized as a “high rate.”

MPCA’s most striking error rate was a 100 percent failure to comply with performance reporting requirements.

State agencies are required to submit reports to the Administration Department after the completion of contracts totaling more than $25,000. Of the five MPCA contract reports tested, omissions were found in each. MPCA was not alone, however; widespread noncompliance amongst the four other departments tested caused OLA staff to question the Administration Department’s leadership capabilities as the state’s central procurement agency.

Due to the sample size, neither the OLA nor MPCA were able to provide lawmakers with the total amount the agency overpaid contractors in the past three years, or whether the sample size is reflective of the agency’s overall practices. The total value of MPCA contracts from 2015-17 was $77.6 million.

The report recommends the MPCA collect $1,544 identified as overpayments and review all contractor invoices the audit did not test, as well as obtain adequate documentation to substantiate all charges on contractor invoices. The report also recommends the MPCA comply with retainage requirements to protect state interests and submit required contract reports.

In a written response to the findings, Commissioner John Linc Stine said the MPCA would thoroughly review all contractor invoices, including requesting additional information from contractors in order to support their invoiced amounts. If that documentation is insufficient to merit payment, Linc Stine wrote, the agency would collect back the overpayment.